State borrows to cover unemployment benefits

LANSING - When the Dura Automotive Systems Inc. plant in Mancelona laid off about 300 employees this summer, Rick Churchill was among those who lost their jobs, and consequently, their health care benefits.

"I worked there 23 years and it had never been an issue before," said Churchill. "I'm just waiting to see if I pick up a job real soon."

If Churchill applies for unemployment benefits, something he said he's considering, he won't have to worry about the state's unemployment insurance benefits drying up, according to the Department of Labor and Economic Growth. That's despite a recent report from a policy group saying the state trust fund is facing insolvency.

According to the National Employment Law Project (NELP) in New York, which advocates for low-wage workers, Michigan is one of 10 states paying more in benefits than it had saved in its unemployment insurance trust fund.
But the amount of benefits won't change, said Norman Isotalo, a department communications specialist in Detroit.

"For unemployed workers in the state, regardless of the status of the trust fund, we will borrow money from the U.S. Department of Labor in order to ensure there are funds to pay unemployment benefits," he said.

Consequently, employers will see an increase in federal unemployment insurance taxes, Isotalo said. The tax hike will help repay the state's federal loan.

"We are paying out more in benefits than we've covered in our trust fund," said NELP Midwest coordinator Rick McHugh. "As a result, we've had to draw on these loans to continue to pay benefits."

Michigan's unemployment insurance fund deficit is the result of the bad economy and mismanagement by the state, he added.

In 2007, the state collected $1.5 billion in unemployment insurance taxes and paid out $1.8 billion in benefits.

The state should have raised unemployment insurance payroll taxes when economic times were good to prepare for imminent economic recessions, McHugh said.

In Grand Traverse County, the number of unemployment claims increased from 4,553 in 2006 to 4,687 in 2007, according to Labor and Economic Growth.

So far this year, more than 3,300 claims in Grand Traverse County and 385,000 claims statewide have been filed.

In Leelanau County, 946 claims were filed in 2006, 934 in 2007 and more than 641 so far this year.

The state's monthly average number of claims increased from 46,815 in 2006 and 45,262 in 2007 to 48,315 as of Sept. 30, 2008.

Michigan's unemployment rate, the highest in the nation, reached 8.9 percent in August, with 439,000 unemployed.

Isotalo said the increase in the number of jobless workers, along with a lower taxable base, contributed to the fund's shortfall, Isotalo said.